WRITER: Alexia Deegan
IT’S ALWAYS BEEN A MATTER OF TRUST
WHEN NOTIONS OF HONESTY, FAIRNESS AND PUBLIC TRUST ARE SO THOROUGHLY UNDERMINED, HOW DO ORGANISATIONS REBUILD POSITIVE RELATIONSHIPS WITH CUSTOMERS?
Australia's recent royal commission into banking found massive breaches of trust on all fronts. When public trust is so thoroughly undermined, how do organisations rebuild positive relationships with customers?
Genuine reform can only be achieved through values-led leadership, driven from the top and clearly communicated to all. CEOs should take an active role in instigating change instead of waiting for governments to impose it.
In March this year, leading social commentator Bernard Salt said the 2010s may forever be remembered as “the era in which we lost faith in the very institutions that underpin society”. It's a damning statement, but given the massive failures across aged care, banking, and even the clergy, without change it could hold true. Is this the natural order of things, or can businesses find ways to rebuild public trust?
UniSA’s Dr Sukhbir Sandhu, a specialist in sustainable business practices and strategic management, says the importance of trust cannot be underestimated. “Economies that function well have strong levels of trust in their corporations, communities and in individuals,” Dr Sandhu says.
“Leadership plays a key role in this. When individual leaders demonstrate values of trust, their potential to build positive relationships increases, providing a moral buffer if things go wrong.
“Ultimately, trust is about three interrelated values – compassion, competency and consistency – and the perfect balance is key to long-term success.”
Dr Sandhu’s research shows that trust provides organisations with the 'social license to operate' among local communities and stakeholders. When businesses build positive, responsible relationships with communities, they earn social capital which puts them in good stead if things get tough.
Take Johnson & Johnson, for example, a well-known, long-established and trusted brand. In 1982, the company's best-selling Tylenol painkiller was maliciously laced with cyanide, causing the deaths of seven people. A severe public health and corporate crisis, Johnson & Johnson acted decisively and swiftly, recalling 31 million bottles, halting production and advertising of the product. Its response immediately put customer safety first, demonstrating the company's motivations and concern. Post crisis, it announced tamper-resistant standards for all its products. The handling of this incident saw Johnson & Johnson praised for its response, helping it remain a highly trusted and successful brand.
“Trust is the lifeblood of any organisation. It is the single biggest determinant of long-term, sustainable success.”
Dr Sandhu says such values-led leadership is significant in rebuilding trust in any organisation. Her research highlights that as trust in public institutions continues to fall (both nationally and internationally), an increasing number of CEOs are taking up an activist role on a diverse range of issues such as climate change, gender diversity and marriage equality.
“Genuine reform, driven from the top and communicated clearly, is paramount,” Dr Sandhu says.
“Even in some of the worst scenarios, sincere competent engagement, finding a solution, correcting a problem, and open communication with customers, staff and communities are the foundation for rebuilding trust.
“This is far more than a superficial claim of transparency – people need to see, hear and understand that there is real action for improvement or reparation and an acknowledgement of responsibility for problems.”
In a PwC publication, The Press, PwC Australia CEO Luke Sayers said companies and their leaders need to be more articulate and transparent of both rights and wrongs if they are to maintain trust.
“Trust is the lifeblood of any organisation. It is the single biggest determinant of long-term, sustainable success,” Sayers said.
“There needs to be a much more open and engaging approach by business. The transparency piece is pivotal.
“A company might have a great purpose and do wonderful work to help society but if it isn’t effectively communicated, or the leader doesn’t take accountability for failings, then they are not going to bridge the trust divide.
“Employees are also a critical part of the answer – if your workforce is advocating for you at barbecue conversations because they believe in the company and what they are doing, you are halfway there. In our latest CEO Survey, 89 per cent of Australia’s CEOs believe that being transparent and focused on a company’s values helps build trust with their workforce.”
UniSA organisational psychologist Dr Ruchi Sinha says while trust is a construct derived to understand a human psychological phenomenon, it's often generalised to institutions, organisations and nations.
“People make judgements about trustworthiness based only on a small number of attributes,” Dr Sinha says. “But, to understand these you must first define trust which is a willingness to make yourself vulnerable to your counterpart; a belief that the other person will act in your interests.”
She says there are two routes for building trust. The first is cognitive – rational and calculated, where the trustor looks for evidence of competence, reliability, dependability, and consistency. Their track record, in other words. The second is emotional – based on similar values, attitudes and the extent to which there is evidence that our best interests are their priority.
Dr Sinha says New Zealand’s Prime Minister Jacinda Ahern’s handling of the recent Christchurch shootings shows her benevolence and ability to empathise with a diverse group of people.
“When Prime Minister Ahern mourned shoulder-to-shoulder with the people after the Christchurch mosque shootings, it showed her integrity, and her ability to create a sense of solidarity,” Dr Sinha says.
“Her swift moves to change gun laws and prevent online streaming of horrific events evidenced her determination to put the best interests of the people first. Such timely actions also show consistency between her promised words and actions, reinforcing her reputation as sincere, trustworthy and genuine.”
In contrast, Dr Sinha says that when terrible events are handled badly, trust can be irreparably damaged.
“The 2010 Deepwater Horizon oil disaster is one of the most infamous examples of trust gone wrong,” Dr Sinha says. “Aside from the obvious catastrophic damage to the environment, the public handling of this crisis is considered one of the worst-managed cases in history.
“Delays in communication, the severe lack of response, responsibility and empathy, all negatively impacted BP and even to this day continue to affect their reputation.”
Without doubt, trust is built over time and, like an investment, needs to be well-understood and carefully monitored. Yet, it’s also tenuous and can crumble if mismanaged. Dr Sinha says CEOs must be aware of the fragility of trust and that timely, proactive, sincere and authentic reactions to mistakes signal competence, integrity and benevolence.
“When trust violations occur, there is usually a big drop in trust, often a drop well below the trust baseline established in the past,” Dr Sinha says. “Commonly you see this when a company has a very public one-off failure, for example, the Volkswagen emissions scandal. Showing remorse and making substantive amends signals integrity without necessarily compromising perceptions about competence.”
GOING BEYOND PROFIT
Former finance sector CEO and now UniSA senior lecturer in business, Dr Don Clifton, says trust issues often lie in the system.
“Every year, you go through the media and the business headlines will show major ethical failures,” Dr Clifton says. “We seem to be operating in an environment where anything is up for grabs to chase down that last dollar of revenue.
“It’s time we reorder out priorities – an economic system where profit takes priority over all else is a complete recipe for unethical behaviour.”
Dr Clifton says that while it is important to acknowledge that there are people working to develop triple bottom lines by making profit dependent on positive social and environmental outcomes, there are not enough of them.
“Chiefly, the system fails to live up to a core ethical principle: the principle of humanity,” Dr Clifton says.
“We live in a world where the things that are showcased as most valuable are framed in economic terms, where people are often treated as tools in the economic machine.
“In that environment, trust between business and communities will always face challenges because people understand they’re subordinate to profits.
“Unless we open discussion on alternatives to this economic model, trust and ethical practice will always be undermined.”
Recently, 16-year-old Greta Thunberg inspired climate strikes across the world with her #FridaysForFuture campaign. Dr Clifton says it’s refreshing to see young people stand up for issues that will potentially impact their future.
“There has been some criticism and cynicism about young people getting active on issues that matter to them, but I was heartened to see this young activist organise the climate strike and stand up for her beliefs. She said it was her future we’re messing with, and she’s right.
“It’s a sad sign when we see the older generations, many of whom were very active protesters in their younger days, criticise the climate change concerns of young people today – especially when that’s an excuse for inaction.
“Pursuing immediate self-interest and short-sighted planning, creates all the right conditions for low trust and stagnant societies. Something we should avoid at all costs.”
Interestingly, global findings from the 2019 Edelman’s benchmark Trust Barometer (an annual report of more than 33,000 respondents over 27 markets) found unprecedented consumer expectation for CEOs to step up and speak out on a range of social, economic and environmental issues, filling the void left so often by governments.
According to the 2019 Edelman Trust Barometer, standing up for the right thing is the new mandate for business. The barometer shows that 76 per cent of consumers believe that it’s critically important for CEOs to take the lead on change rather than waiting for government to impose it.
Whether this eventuates, we’ll just have to wait and see. Watch this space